BHP Billiton ramps up iron ore production and ups spending on its US onshore arm

 
Courtney Goldsmith
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BHP Billiton Announces Record Financial Results
BHP Billiton increased iron ore production over the year (Source: Getty)

BHP Billiton's full-year production met analysts' expectations, but investors are expected to question the firm's increased capital spending on its US onshore division.

The figures

BHP said development activity of its US shale fields was increasing, with up to 10 rigs operating in the 2018 financial year, up from five in June. The company will also increase spending to $1.2bn (£921.6m) from $0.55bn.

Iron ore production increased four per cent to 231m tonnes due to productivity improvements across the supply chain, BHP said in an operational update for the year ended 30 June.

The firm's copper output fell by 16 per cent to 1.3m tonnes as a result of strikes at its Escondida mine in Chile and maintenance work, which led it to book a $546m (£419m) charge.

Cyclone Debbie damaged a third party rail network, which caused metallurgical coal volumes to fall by six per cent to 40m tonnes.

Shares in the FTSE 100 firm were down 0.11 per cent to 1,311p in morning trading.

Read more: Activist investor Elliott is having a go at "do nothing" BHP Billiton again

Why it's interesting

While the company's operations were mainly in line, it said little about its new chairman, Ken MacKenzie. MacKenzie's appointment comes amid activist investor Elliott Partners' calls to overhaul the board and spin off the company's US shale unit.

Analysts at Jefferies said MacKenzie appears open to a revamp of BHP's strategy with all options on the table.

"If BHP collapses the DLC [dual listed company] exits from US shale or spins out the entire petroleum division, makes further divestment of non-core assets and/or revamps the capital allocation framework then the market is likely to positively react."

Tyler Broda at RBC Capital Markets said investors will question the decision to increase spending on its US onshore division, which it sees as a precursor to sell the onshore division.

Read more: Elliott pushes for "upgrade" to BHP board ahead of new chairman

What BHP said

Chief executive Andrew Mackenzie said:

Our people have stepped up to unlock low-cost latent capacity and achieve strong productivity gains across our tier one assets.

Our relentless focus on safety, productivity and capital discipline will support strong growth in shareholder value.

Read more: BHP Billiton approves $250m payout over Samarco disaster

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